On Independence Day, PM Emphasis How GST Played a Vital Role in Building a Strong Tax System for Atmanirbhar Bharat

On 15th August 2025 (Sunday), during the 79th Independence Day celebration in India, Prime Minister Narendra Modi addressed the nation and highlighted how the Goods and Services Tax (GST), which was introduced in 2017, is one of the significant tax reforms, that has over years played a vital role in building a strong tax system of country and also helped various sections of society to develop financially. GST has made a positive impact on the Indian Economy.

The Central Government is now thinking of launching the next generation of reforms in GST to build an “Atmanirbhar Bharat,” meaning a self-reliant India. These new reforms will focus on three main pillars, i.e., Structural Reforms, Rate Rationalisation and Ease of Living.

1. Structural Reforms

This pillar of structural reform is focused towards improving the basic structure and functioning of the GST system:

• Fixing Inverted Duty Structures: In some sectors, the tax on raw materials (inputs) is higher than that on finished products (outputs). This causes businesses to collect extra tax credits that they cannot use easily. The government is now looking to solve this discrepancy to reduce such unused tax credits and encourage more products to be made within the country.
• Resolving Classification Issues: It is also a major confusion or dispute about which GST rate applies to which product or service. The government is now planning to resolve these classification issues to avoid conflicts, streamline rate structures, make compliance easier, and treat all sectors fairly.
• Providing Stability and Predictability: The Prime Minister highlighted that businesses must know what to expect in the long term. Hence, the government want to provide long-term clarity and stable GST policies to help companies plan better and to build industry confidence.

2. Rate Rationalisation

This pillar of rate rationalisation is about making GST tax rates simpler and fairer for every section of society:

• Lowering Taxes on Common and Aspirational Items: Items used commonly by people (common-man items), such as food, basic household goods, etc., and aspirational goods such as mobile phones, appliances, etc., will be accessible to people at cheaper rates. This will increase affordability and encourage people to spend more, which helps the economy grow.
• Reducing Number of Tax Slabs: Presently, there are multiple GST tax slabs in the country. The government is now planning to reduce them and shift to just two main slabs: a standard rate and a merit (lower) rate. Only a few special items will have different rates. This change will make GST easier to understand and manage.
• End of Compensation Cess: The government is now thinking of ending the Compensation Cess (extra tax collected to compensate states for GST revenue loss). This has created fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability.

3. Ease of Living

The third pillar is focused towards making the GST process smoother and less burdensome, especially for small businesses, startups, and common taxpayers:

• Easy Registration: Getting a GST registration will become faster and fully online, making it easy for small businesses to join the formal economy.
• Pre-filled Returns: Tax returns will be pre-filled using available data, so businesses won’t have to fill in everything manually. This reduces errors and effort.
• Faster Refunds: Especially for exporters and those facing inverted duty structures, the refund process will become quicker and automatic, improving cash flow.

The government has already prepared and shared its proposal for these reforms with a special group called the Group of Ministers (GoM), which was formed by the GST Council. This GoM will study the proposal and give its recommendations.

The GST Council (which includes the Centre and all the States) will then meet to discuss and decide on how to move forward. The government is aiming to implement these reforms within this financial year, after getting consensus from all states, following the spirit of cooperative federalism.